Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 66

Evaluating the Effect of Factoring on the Receivables Turnover Ratio and Computing the Cost of Factoring
After noting that its receivables turnover ratio had declined, Imperative Company decided for the first time in the company's history to sell $500,000 of receivables to a factoring company. The factor charges a factoring fee of 3 percent of the receivables sold. How much cash does Imperative receive on the sale Calculate the factoring fee and describe how it is reported by Imperative Company. All else equal, how will this affect Imperative's receivables turnover ratio in the future